7 Days Late Market Update: Signs of the coming soft landing of Toronto real estate

Toronto real estate after a recent exponential boom is showing signs of a cooling market.

With more listings, we are seeing a little more supply, with a slight relieving of demand and a slower value accumulation compared to the previous months of 2017.

To think that just a couple of months ago the media was in yet another storm of worry, moral panic questions and estimations were the most popular topics.

Headlines punched “THE END IS NEAR!” into so many titles that the belly had gone yellow on news media’s coverage of Toronto real estate.

It’s even humorous when I reminisce on the late 2014 and early 2015 storm of buzz worthy moral panic over Toronto’s long booming real estate market.

To imagine that in light of a worried public over Toronto housing, Premier Wynne would come rolling down that mountain heralding 16 measures (Ontario Fair Housing Plan) that her provincial government claimed would cool the hot Toronto housing market and make it affordable for younger generations.

What a claim. What a goal. What a pile of shit.

A once troublesome pile of shit, now just a funny puddle.

Here you have a media that has long been nurturing the idea that the Toronto real estate market is going to collapse due to its exponential growth, a topic I assume popular due to the attention grab they statistically get.

You have a period where Toronto real estate early into the year made huge leaps of value accumulation, a media storm calling it bigger than the late 80s bubble, a worried public and a provincial Liberal government with a grossly low approval rating.

That paragraph is easy to figure out, it’s an easy equation.

Low approval government jumps at insane market growth in light of a moral panic generated by click-bait fear titles, all in attempts to gain approval in a coming election.

It’s obvious just looking at the sheer desperation of their legislative agenda, 16 measures is a pretty steep and desperate number to attempt to cool a market.

And that’s why it’s such a funny pile of shit at this point.

Because it didn’t matter.

Or I should say, it looks like it might not matter.

Toronto real estate for the second consecutive month, since Wynne’s grand saving announcement, has shown signs of a cooling market.

Fact, a market shifting from a seller’s to a buyer’s market.

THE TORONTO REAL ESTATE MARKET
MAY 2017 AVERAGES

The following stats are sourced from TREB’s Market Watch, they represent bothΒ  Toronto and GTHA real estate averages.

Sales in Toronto real estate were down 20.3%

12,790 = Sales in May 2016
10,196 = Sales in May 2017

New listings in Toronto were up 48.9%

17,356 = New listings in May 2016
23,837 = New listings in May 2017

Active listings in Toronto were up 42.9%

12,931 = Active listings in May 2016
16,477 = Active listings in May 2017

Average days on the market was down 26.7%

15 was the average DOM in May 2016
11 was the average DOM in May 2017

The average for sale price of a Toronto home was up only 14.9%

$752,100 was the average price in May 2016
$863,910 was the average price in May 2017

The following stats sourced from TREB represent just housing categories within Toronto alone.

Detached-homes in Toronto

saw the smallest increase of 16.6% in price to an average of
$1,503,868

Semi-detached homes in Toronto

saw an increase of 27.2% inΒ  price to an average of
$1,062,318

Townhouses in Toronto

saw an increase of 18% in price to an average of
$741,211

Condos in Toronto

saw the largest increase of 27.7% in price to an average of
$564,808

TREB President Larry Cerqua gives an analysis of the numbers for May 2017.

“Home buyers definitely benefited from a better supplied market in May, both in comparison to the same time last year and to the first four months of 2017. However, even with the robust increase in active listings, inventory levels remain low. At the end of May, we had less than two months of inventory. This is why we continued to see very strong annual rates of price growth, albeit lower than the peak growth rates earlier this year,” said Mr. Cerqua.

No the market is not in a state of cooling, but it’s showing signs of a market slowing down, a market headed for a cooling trend.

The first sure sign is a transition from a market that favours the seller to one that is beneficial for the buyer.

This is due to the increase in active listings.

With more selection on the market it helps to relieve current and vented up demand for the market, dispersing it across an array of listings reducing competitive stress.

The market has more selection for buyers and a little less competition.

Despite the current increase in average property value, if the current trend of active listings continues we should see a decrease in property appreciation month-to-month.

That is unless the Ontario Liberals don’t knock it off the tracks before then!

Wynne’s government gets no share in the glory in the prologue of a cooling market, according to Jason Mercer, TREB Director of Market Analysis

“The actual, or normalized, effect of the Ontario Fair Housing Plan remains to be seen. In the past, some housing policy changes have initially led to an overreaction on the part of homeowners and buyers, which later balanced out,” said Mercer.

Even though I would be happy to deny Wynne any responsibility in a cooling market, I believe her government’s impact is not legislative but more conscious provoking.

I believe that the recent rise in listings is due the impending end of overt prosperous growth in Toronto real estate, that reality being made more concrete with a government that promises to intervene; whether that intervention be the prevailing promise to cool the market or the absolute derailment of it.

I believe in light of that intervention you have homeowners reacting to a currently strong market that has higher chances of slowing down than it does continuing its hyper-appreciation.

“On the listings front, the increase in active listings suggests that homeowners, after a protracted delay, are starting to react to the strong price growth we’ve experienced over the past year by listing their home for sale to take advantage of these equity gains,” said Mercer.

Imagine that, hyper-appreciating market corrects itself in light of coming action.

The increase in active listings is due to a vented up statistic of Toronto homeowners planning to sell.

Homeowners that have sat on their property through a booming time waiting to to see how much more they could get.

A reality not hard to manage considering that some people have already made an exponential amount off the years of accumulation, it wouldn’t be too much of a risk to hold out for the first signs of slowing or decline.

Toronto’s most historic growths in real estate value,

a news media obsessed with the fantasy of the market’s doom through fear-bait content frames,

and a Liberal government in reckless desperation, plans to be the hero for it.

In light of all that, it’s not hard to imagine why the listings have increased.

It’s booming and it’s been promised to be stopped, so homeowners plan to cash on their currently guaranteed gains before it’s too late

When the value accumulation of Toronto property slows to an increase that no longer creates a profitability in speculating on a Toronto house, we will see more sales and in turn a trend that creates a healthy supply of listings to both slow the appreciation of Toronto real estate and turn a market in favour of the buyer.

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